ERISA Fiduciaries May Have Obligations to Seek Recovery of Portfolio Losses
Trustees and other fiduciaries of plans established under The Employment Retirement Income Security Act of 1974 (ERISA) must protect plan assets “with the care, skill, prudence, and diligence … that a prudent man acting in a like capacity and familiar with such matters would use….” In other words, ERISA fiduciaries must not merely act like prudent person, but instead like prudent experts. This applies to smaller ERISA plans as well as larger ones. If ERISA trustees do not possess the requisite expertise, it behooves them to retain experts to advise them.
When a plan suffers a significant loss (realized or unrealized), ERISA trustees must weight the potential benefits and burdens of various possible courses of action, and make informed decisions. Once a loss is identified, the need to make such decisions is ongoing, and the number and complexity of such decisions can be overwhelming. Among the many decisions that confront ERISA trustees are:
• Whether the plan has a viable cause of action to recover a loss;
• Identification of the potential defendants and likelihood of recovery from each;
• Whether to participate in an already-filed lawsuit or initiate a lawsuit;
• Whether opt out of in a securities class action and seek a larger recovery in a separate direct action or actions;
• Whether to apply to be lead plaintiff in a securities class action;
• Whether to remain a passive class member in a securities class action; and
• Whether to object to a settlement negotiated by a lead plaintiff in a securities class action.
In order to protect the Plan and themselves, ERISA trustees should retain an experienced securities litigation law firm to monitor the plan’s portfolio, identify losses that resulted from possible securities law violations, and evaluate potential claims. While general counsel could serve as monitoring and evaluation counsel, the better practice is to engage a firm with the proper experience and credentials. Once retained, monitoring and evaluation counsel can coordinate with the trustees, custodian, and investment managers to ensure that needed actions are taken.
Page Perry, LLC is an Atlanta-based law firm with over 125 years collective experience representing institutional and individual investors in securities-related litigation and arbitration. Page Perry partners also have an active practice representing ERISA plans, including monitoring plan portfolios and evaluating potential claims. For further information, please contact us.
